Richard Rysiewski: Ask the financial doctor

Q. Has the gift rule changed in 2018? I am considering giving $7,000 to my brother. Do I get a deduction for my gift?

A. The amount that you can gift-give has increased to $15,000 annually to any person without triggering a gift tax. If you are married and your spouse is in agreement, you can double the annual gift to $30,000. You do not get a deduction and the recipient does not declare the gift as taxable income.

Q. My son bought some bitcoins and sold them for a $22,000 gain. Does he have to report this gain on his tax return?

A. Yes, he has to report the gain on his tax return, using schedule D. Trading in bitcoin is considered a capital asset and is taxed as a capital gain or loss. Bitcoin miners must report the virtual currency as taxable income.

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Q. Congress changed the tax laws for 2018. What are the major changes for taxpayers that itemize?

A. The state and local taxes are capped at $10,000, home mortgage interest from home equity loans will no longer be deductible, home mortgage interest on new mortgages is only deductible to the extent of $750,000 of the acquisition indebtedness, and miscellaneous itemized deductions, including unreimbursed employee business expenses, tax return preparation and investment management fees are no longer deductible.

Q. I operate a small business as a sole-proprietorship. Does my sole-proprietorship qualify for the 20% exclusion for income earned by “pass-though” businesses in 2018?

A. Yes, you can exclude 20% of your income earned from your sole- proprietorship. The new law gives a 20% exclusion to “pass-through” businesses, sole proprietor-ships, partnerships, S corporations, limited liability partnerships(LLPs)and limited liability corporations(LLCs). The tax break is based on the ownership interest and is calculated per entity. Individuals with taxable income of less than $157,000 and married couples filing jointly with taxable income less than $315,000 get the full 20% exclusion. Limits on the exclusion come into play if the taxable income is above those thresholds. No exclusion is allowed if the taxable income is greater than $207,500(single) or $415,000(joint).

Q. Did the deduction for medical expenses change in 2018?

A. Yes, for 2018 the medical expense deduction has a threshold of 7.5% of adjusted gross income(AGI). After 2018, the threshold increases to 10%. To save on taxes take as many medical expenses as you can in 2018.

Q. Did the 529 plans that cover educational expenses change under the new tax law for 2018?

A. Previously, the 529 plans covered educational expenses for post-secondary schools. Beginning with 2018, the 529 plans will cover educational expenses for elementary and secondary school including private schools.

Q. My dad is 64 years old, when does he qualify for Medicare coverage?

A. The normal age is 65, however you can qualify earlier if you have been receiving Social Security Disability Insurance(SSDI)for at least 24 months. If you have end-stage renal disease and are getting dialysis treatments you will get Medicare earlier. If you have Amyotrophic Lateral Disease(ALS) you will automatically be enrolled in Medicare when you receive your first monthly check from SSDI.

Q. Where can I get IRS tax forms?

A. You can call (800)829-3676 or use the internet: www.irs.gov to download any form, 24 hours per day, 7 days per week. Several post offices and public libraries have tax forms.

Q. My dad has $11,000 in Ally Demand Notes that pay about 1.25% annual interest. Is this money federally insured? What happens if Ally declares bankruptcy?

A. Ally Demand Notes are not federally insured. The safety of the principal is based on the financial stability of Ally bank. If Ally bank declares bankruptcy, your dad could lose his money. A deposit in Ally bank is safer because it is federally insured up to $250,000 per account holder. Ally bank used to be called GMAC bank. Holders of GMAC Demand Notes never lost any money when GM declared bankruptcy.